June 15, 2012

Shakespeare Theatre Company Sues to Stay in Building

Updated June 26 at 10:05 a.m.

The Shakespeare Theatre Company is suing the nonprofit group that serves as its landlord in District of Columbia Superior Court, claiming the landlord is violating an agreement to support the theater by trying to increase the rent by nearly 700 percent.

According to
complaint (PDF), which was filed on Tuesday, Lansburgh Theater Inc. was established as a non-profit in the early 1990s to support the Shakespeare Theater Company. The theater's building was donated to Lansburgh for the benefit of the theater.

The theater is claiming that after it refused to accept a nearly 700 percent bump in its annual rent, Lansburgh threatened to kick the theater out of its building in Northwest Washington. The theater filed a motion on June 13 for a
preliminary injunction (PDF), noting that it is in the middle of a performance season and has shows and education programs booked for the next two years.

Lansburgh had demanded that the theater leave the building as of today, according to the complaint, but the theater's attorney, Arnold & Porter partner Randall Miller, said the two sides reached an agreement Thursday evening to allow the theater to stay as the case proceeds.

In an e-mail, Miller said that the “Shakespeare Theatre Company seeks injunctive relief as a last resort to enforce its rights to occupy the theatre in the Lansburgh building, which has been its home for more than two decades. We’re confident that the court will not permit the termination of Shakespeare’s occupancy, and that the show will go on."

Kenneth Krozy, president of Lansburgh and one of the defendants, declined to comment. Lansburgh is being represented by Laura Steinberg of Sullivan & Worcester in Boston. She could not immediately be reached.

According to the complaint, Lansburgh is a tax-exempt charity that serves as a supporting organization to the theater. As part of that arrangement, Lansburgh has had access to financial incentives to build a mixed-use development as part of the theater, including residential apartments, retail and restaurants.

The theater claims that the new rent demand is "exorbitant and irrational" because Lansburgh already has more money than it needs in its reserve account. In the complaint, the theater speculates that if Lansburgh ended its agreement with the theater, Lansburgh – and its affiliated companies and directors – would be in a better position to sell the residential units as condominiums or "otherwise benefit" private interests.

The lawsuit accuses Lansburgh of running afoul of its legal status as a supporting organization to a public charity, breach of trust, breach of fiduciary duty and a host of other related charges. Besides declaratory relief from the rent hike and a ruling that the theater has a right to stay in its building, the theater is asking the court to remove at least of Lansburgh's directors from its board.

The case was assigned to Judge John Ramsey Johnson. A scheduling conference is scheduled for Sept. 21.

A previous version of this article incorrectly stated the location of the building at issue. It is in Northwest Washington, not Southeast Washington.